A big rally in American 10-year T-note yields and the inability of the European Union to vaccinate its population have taken their toll on the common European currency, halting the slide in the dollar. Inflation-adjusted “real” yields of long-term US Treasuries are threatening to climb into positive territory but, at negative 0.69%, they are not there quite yet.
Source: www.worldgovernmentbonds.com
The biggest factor in the Euro’s recent collapse is the difference between European and American interest rates. German 10-year bund yields fell nearly 2 full percentage points below American 10-yr Treasuries on Tuesday. This yield differential incentivizes both the purchase of US Treasuries and the dollars needed to buy them, hurting the euro in the process. The dollar is also being supported by the progress the US is making against Covid, especially when compared with the EU. Not surprisingly, the Euro got hit on Wednesday and again on Thursday.
RMB Group trading customers who followed the recommendation in our February blog post to take a bearish position against the euro by purchasing the June $1.19 Eurocurrency puts traded on the Chicago Mercantile Exchange (CME) for $750 should consider exiting half of their positions at twice their initial entry level or higher, taking their initial risk “off the table” in the process. These puts settled for $2,350 on Thursday. Consider holding the other half for a move to our original downside objective of $1.16. Prices can and will change so contact your RMB group professional for the latest.
Data Source: Reuters/Datastream
Please be advised that you need a futures account to trade the markets in this post. The RMB Group has been helping our clientele trade futures and options since 1991. RMB Group brokers are familiar with the option strategies described in this report. Call us toll-free at 800-345-7026 or 312-373-4970 (direct) for more information and/or to open a trading account. Or visit our website at www.rmbgroup.com. Want to know more about trading futures and options? Download our FREE Report, the RMB Group “Short Course in Futures and Options.”
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